How much deposit does a homebuyer need?

In the modern mortgage market, is it still possible for buyers to get 95% LVR loans ­(or even higher), or are those days long behind us?

 

It almost sounds like an urban legend today, but it was only a few short years ago that Australian investors and home buyers could access 100% loans with ease – and in some cases, loans as high as 105% were relatively available.

 

 

Today, the home loan market is much more conservative. In the wake of the GFC banks and lenders have not only tightened up their lending criteria, but they’ve also restricted the loan to value ration that they’re willing to extend to borrowers. Calculate your LVR with Your Mortgage Calcualtor.

 

So is it possible to get a high LVR loan these days if you don’t have much of a deposit? The simple answer is, it depends.

 

The Big Four banks are generally willing to finance home purchases of up to 95%, provided you have a very strong employment history and savings history and evidence of genuine savings. The loan amount will also strongly influence the lender’s decision.

 

Non-bank lenders such as RAMS are now offering up to 97% of the property value, inclusive of 2% lenders mortgage insurance (LMI) capitalisation. This means the borrower can get a 95% loan and then add the cost of the LMI to the loan.

 

For instance, on a home purchase of $400,000, you could access a 95% loan of $380,000, meaning you’ll need to provide a cash deposit of $20,000. However, you can add the cost of LMI of to the loan amount (up to $8,000), which brings the total loan up to $388,000 or 97%. 

 

Bankwest has also come to the party by putting aside half a billion dollars for their new 3% deposit home loan products, to be used exclusively by first homebuyers in WA. Prospective first time buyers will be able to borrow up to 97% of the value of the property, provided they satisfy the bank’s special offer lending criteria.

 

“Our research showed it took about four to four-and-a-half years to save for a deposit under a traditional 80% LVR,” Bankwest managing director Jon Sutton says. “Under this product, at 97%, that brings that down to about six months, so it does help West Australians get into their house a lot quicker.”

 

Sutton says the bank’s strict lending criteria include a minimum annual income threshold of $80,000 for the borrower (or at least one person in a borrowing couple) with a loan amount capped at $500,000. The product itself is two years interest only and 40 basis point off the standard variable mortgage rate.

 

Ultimately, it doesn’t matter whether you’re looking to buy in WA or Western Sydney for investment purposes or for your own home: if you’re in the market for a low-deposit loan, there are certain things you can do to boost your chances of approval. Homeloanexperts.com.au offers the following advice:

 

Clear credit history

This means that your credit file has no blemishes whatsoever and that you have paid all of your bills such as rent, credit cards, personal loans and other debts on time every time for the last six months.

 

Stable employment

In most cases you must have been in your current job for 6 to 12 months.

 

Strong income

Lenders are more conservative when assessing your ability to repay a 95% loan, so your serviceability ratio must be outstanding.

 

Good asset position

Lenders want to see that you have a good asset position relative to your age and income.

 

Genuine savings

You will generally need to prove that you have saved 5% of the purchase price.

 

Minimal debts

Applicants with many credit cards and personal loans may struggle to be approved. As a rough guide, people who have more than 7% of the purchase price in unsecured debts such as personal loans and credit cards are often not approved.


Elite Wealth Creators have been involved in the property and finance industry for over 20 years.  Our Investment Property Strategists deliver investment grade properties to the investment market and mediate between the developer and the investor. We also assist first home buyers in purchasing their first home in QLD through our house and land packages – this includes receiving $20,000 cash back towards their mortgage by buying one of our full turn-key packages.
Our service will take you through the complete process of buying positive cash flow property, including:
• educating you on positive cash flow and the ability to pay your mortgage off years in advance
• saving you thousands of dollars in interest
• supporting you in the decision on which property to buy
• assisting in the organizing of your finances, if required
• preparing you for settlement of contracts
• liaising with other professional advisers on your behalf if required.
Our Strategists specialise in delivering quality positive cash flow property and also helping investors pay off their mortgage years in advance

http://www.elitewealthcreators.com/
sales@elitewealthcreators.com
1800 GO ELITE